SEC. 9. With a view to encourage the repair of existing residential buildings, and the rehabilitation requirements and recovery from damage caused by the elements, the Home Financing Commission shall prescribe rules and regulations to govern the insurance authorized under this section in accordance with the provisions set forth hereunder:
The Commission is authorized to insure banks, insurance companies, building and loan associations and other qualified lending institutions against losses which they may sustain as a result of eligible property improvement loans. The lending institutions shall be charged with the responsibility of exercising the proper credit judgment in making the loans.
The lending institution shall be insured against losses up to ninety per centum of the aggregate net amount loaned over a given period.
Two classes of loans may be issued under this Section at the discretion of the Commission even though they may be subject to existing mortgages:
Loans covering the cost of repair, alteration or improvement begun after the date of the approval of this Act of an existing structure, such loans not to be in excess of six thousand pesos and to mature in not to exceed five years on a monthly amortization basis;
Loans covering the cost of alteration, repair improvement or conversion begun after the date of the approval of this Act of an existing structure used or to be used as a dwelling for two or more families, such loans not to be in excess of twenty thousand pesos and to mature in not exceeding ten years on a monthly amortization basis.
SEC. 10. (a) The Commission is authorized, upon application by a qualified mortgagee, to insure in accordance with the provisions of this Act, any mortgage offered to it which is eligible for insurance as hereinafter provided, and, upon such terms as the Commission may prescribe, to make commitments for the insuring of such mortgages prior to the date of their execution or any disbursement thereon.
(b) To be eligible for insurance under this section a mortgage shall—
Involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Commission shall approve) in an amount—
not to exceed twenty five thousand five hundred pesos nor in any case ninety per centum of the appraised value (as of the date of the mortgage is accepted for insurance) of a property, whether urban, suburban, or rural, upon which there is located a dwelling designed principally for a single-family residence, the construction of which is begun after the date of approval of this Act and which is approved for mortgage insurance prior to the beginning of construction: Provided, That no mortgage shall be insured under this paragraph unless the mortgagor shall be the owner and occupant of the property at the time of insurance and shall have paid on account of the property, in cash or its equivalent, at least ten per centum of the appraised value thereof;
not to exceed nine thousand five hundred pesos nor in any case ninety-five per centum of the appraised value of a property, whether urban, suburban, or rural, upon which there is located a dwelling, designed principally for a single-family residence prior to the beginning of construction: Provided, That no mortgage shall be insured under this paragraph unless the mortgagor shall be the owner and occupant of the property at the time of the insurance and shall have paid on account of the property, in cash or its equivalent, at least five per centum of the appraised value thereof.
Have a maturity satisfactory to the Commission, but not to exceed twenty-five years in the case of those under paragraph (1) (A) and (1) (B) hereof.
SEC. 11. (a) The Commission is authorized upon application by the mortgagee, to insure, in accordance with the provisions of this Act, any mortgage offered to it which is eligible for insurance as hereinafter provided and upon such terms as the Commission may prescribe (including advance on such mortgages during construction), if the mortgage covers property held by—
The National Government, provincial, city or municipal governments, or government-owned or controlled corporations and agencies.
Private corporations, developmental builders, associations, cooperative societies which are legal agents of owner-occupants, or trusts formed or created for the purpose of rehabilitating slum or blighted areas, or providing housing for rent or sale, and which possess powers necessary therefor and incidental thereto, and which until the termination of all obligations of the Commission under such insurance, are regulated or restricted by the Commission as to rents or sales, charges, capital structure, rate of return, and method of operation to such extent and in such manner as to provide reasonable rentals to tenants and a reasonable return on the investment. The Commission may such contracts with, and acquire for not to exceed one hundred pesos, such stock or interest in, any such corporation, association, cooperative society, or trust as it may deem necessary to render effective such restriction or regulation. Such stock or interest shall be paid for out of the fund and shall be redeemed by the corporation, association, cooperative society, or trust at par upon the termination of all obligations of the Commission under the insurance.
An individual owner or joint-owners,
(b) Such mortgages may cover the installation of improvements involving—
A project by a developmental builder for the construction of not less than twenty dwellings at one time under a single-mortgage with a release clause permitting the subsequent sale of each individual completed house together with land. Loans for advances of funds used for purchase of material in anticipation of mass construction and standardization of parts may be insured in the discretion of the Commission.
A rental project of at least twenty units and not to exceed one thousand units and involve a principal obligation (including such initial service, charges, appraisal, inspection, and other fees as the Commission shall approve) in an amount not to exceed five million pesos.
(c) To be eligible for insurance under this section a mortgage shall—
Involve a principal obligation not to exceed eighty per centum of the prudent cost to the builder of the proposed physical improvements, including buildings, utilities within the boundaries of the property or projects, cost of land, architect's fees, taxes and interests accruing during construction; but not including builders' profit nor other charges, except (for estimated depreciated cost of any existing utilities). The builder shall submit certified bills of sale and other evidences of cost and the Commission shall be the sole judge of the prudence of the expenditure as necessary to comply with the plans and specifications.
GENERAL PROVISIONS
SEC. 12 (a) Notwithstanding the foregoing provisions, the Commission may, as a matter of sound business policy, set a limit on the total amount to be insured under each section of this chapter and in no case shall the aggregate amount of the outstanding principal obligations of mortgages insured under this chapter exceed five hundred million pesos at any one time.
(b) The Commission shall fix, in accordance with sound actuarial practice and the risk characteristics involved, the rates of insurance premiums for each class of loans or mortgages as prescribed under each section of this chapter: Provided, however, That no insurance premium for any particular class of loans or mortgages shall be fixed at less than one half of one per centum nor more than one per centum of the amount of the outstanding principal obligation. Such premium charges shall be payable by the mortgagee, either in cash, or in debentures issued by the Commission at par value plus accrued interest, in such manner as may be prescribed by the Commission.
(c) The Commission may, in accordance with the provisions of the mortgage, or in the absence thereof, upon such terms and conditions as it may prescribe, release part or parts of the mortgaged property from the lien of the mortgage.
(d) The Commission may charge and collect such amounts as it deems reasonable for the appraisal of a property or project offered for insurance and may likewise charge and collect such amounts as it deems reasonable for the inspection of such property or project during construction: Provided, That such charges for appraisal and inspection shall not aggregate more than one per centum of the principal face amount of the mortgage.
SEC. 13. To be eligible for insurance under this chapter, a mortgage shall—
Have been made to, and be held by a qualified mortgagee approved by the Commission as responsible and able to service the mortgage property;
Contain complete amortization provisions satisfactory to the Commission requiring periodic payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Commission;
Bear interest (exclusive of premium charges for insurance) at not to exceed five per centum per annum on the amount of the principal obligation outstanding at any time, or not to exceed six per centum per annum if the Commission finds that in certain areas or under special circumstances the mortgage market demands it: Provided, That loans made under section nine may be made at a discount of five pesos per annum per one hundred pesos;
Provide, in a manner satisfactory to the Commission for the application of the mortgagor's periodic payments (exclusive of the amount allocated to interest and to the premium charge which is required for mortgage insurance as hereinafter provided) to amortization of the principal obligation of the mortgage; and,
Contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, default reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, additional and secondary liens, and other matters as the Commission may in its discretion prescribe.
PAYMENT OF INSURANCE
SEC. 14. (a) In any case in which the mortgagee in a mortgage insured under this chapter shall have foreclosed and taken possession of the mortgaged property in accordance with regulations of the Commission, the mortgagee shall be entitled to receive the benefit of the insurance as hereinafter provided, upon (1) the prompt conveyance to the Commission of rights to the property and (2) the assignment to it of all claims of the mortgagee against the mortgagor or others. Upon such conveyance and assignment, the obligation of the mortgagee to pay the premium charges for insurance shall cease and the Commission subject to the cash adjustment hereinafter provided, issue to the mortgagee debentures having a total face value equal to the value of the mortgage and a certificate of claim, as hereinafter provided.
(b) For the purpose of the above sub-section (a), the value of the mortgage shall be determined, in accordance with the rules and regulations prescribed by the Commission, by adding to the amount of the original principal obligation of the mortgage which was unpaid on the date of the institution of foreclosure proceedings, or on the date of the acquisition of the property after default other than by foreclosure, the amount of all payments which have been made by the mortgagee for taxes, ground rents, and water rates, which are liens prior to the mortgage, special assessments which are noted on the application for insurance or which become liens after the insurance of the mortgage, insurance on the mortgaged property, and any mortgage insurance premiums paid after either of such dates, and by deducting from such total amount any amount received on account of the mortgage after either of such dates and any amount received as rent or other income from the property, less reasonable expenses incurred in handling the property, after either of such dates.
(c) Debentures issued under this chapter shall be in such form and denominations in multiples of P50, shall be subject to such terms and conditions, and shall include such provisions for redemption, if any, as may be prescribed by the Commission, and may be in coupon or registered form. Any difference between the value of the mortgage determined as herein provided and the aggregate face value of the debentures issued, not to exceed P50, shall be adjusted by the payment of cash by the Commission to the mortgagee from the Fund as to mortgages insured under this chapter.
(d) The debentures issued under this chapter to any Mortgagee with respect to mortgages or loans insured under Chapters II and III shall be executed in the name of the Home Financing Commission as obligor, and signed for the Commission by the Chairman-General Manager by either his written or engraved signature, and shall be negotiable exempt from taxation, attachment, execution or seizure redeemable at the option of the Commission at or before maturity and fully guaranteed as to principal and interest by the Republic of the Philippines. All such debentures shall be dated as of the date the foreclosure proceedings were instituted, or the property was otherwise acquired by the mortgagee after default, and shall bear interest from such date at a rate as approved by the monetary board in an amount equivalent to the average yield to maturity, so revealed by market quotations, on all outstanding marketable obligations of the Republic of the Philippines having a maturity date of ten or more years from the first day of the next preceding month and by adjusting such average annual yield to the nearest one eight year per centum. The interest on the debentures shall be payable semi-annually on the first day of January and the first day of July of each year, and the debentures shall mature ten years after the date on which the debentures were issued or three years after July first following the maturity of the mortgage on the property in exchange for which the debentures were issued whichever is the shorter period, and may be used at the option of the mortgagee in the payment of insurance premiums due the Commission.
(e) The certificate of claim issued by the Commission to any mortgagee shall be for an amount which the Commission determines to be sufficient, when added to the face value of the debentures issued and the cash adjustment paid to the mortgagee, to equal the amount which the mortgagee would have received if, at the time of the conveyance to the Commission of the property covered by the mortgage, the mortgagor has redeemed the property and paid in full all obligations under the mortgage and a reasonable amount for necessary expenses incurred by the mortgagee in connection with the foreclosure proceedings, or the acquisition of the mortgaged property otherwise, and the conveyance thereof to the Commission. Each such certificate of claim shall provide that there shall accrue to the holder of such certificate with respect to the amount of such certificate, an interest at a rate to be determined by the Commission. The amount to which the holder of any such certificate shall be entitled shall be determined as provided herein.
(f) If the net amount realized from any property conveyed to the Commission under this section and the claims assigned therewith, after deducting all expenses incurred by the Commission in handling, dealing with, and disposing of such property and in collecting such claims, exceeds the face value of the debentures issued and the cash paid in exchange for such property plus all interest paid on such debentures, such excess shall be divided as follows:
If such excess is greater than the total amount payable under the certificate of claim issued in connection with such property, the Commission shall pay to the holder of such certificate the full amount so payable, and any excess remaining thereafter shall be paid to the mortgagor of such property; and
If such excess is equal to or less than the total amount payable under such certificate of claim, the Commission shall pay to the holder of such certificate the full amount of such claim.
(g) The aggregate amount at any one time of all such debentures issued to mortgagees with respect to mortgages or loans insured under this Act shall be fixed by the Commission with the approval of the President after consultation with the Monetary Board, which shall in no case exceed the aggregate amount of the outstanding principal obligations of all mortgages insured under this Act.
INVESTMENT OF FUNDS
SEC. 15. Moneys in the Fund, not needed for the current operations of the Home Financing Commission, shall be deposited with any government or commercial banks as may be approved by the Commission to the credit of the Fund, or invested in bonds or other obligations issued or guaranteed as to principal and interest by the Government. The Commission may purchase in the open market debentures issued under the provisions of this Act. Debentures so purchased shall be cancelled and not reissued.
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
